ITALY’S FEUD WITH EU TURNS PERSONAL

▶ Deputy prime minister implies the bloc’s leader has a drinking problem amid budget row between Rome and Brussels

Taking aim at Europe’s leadership, Italy’s deputy prime minister yesterday said Brussels was seeking to bring his country to its knees after a market sell-off over Rome’s plans to lift government spending.

Matteo Salvini, also interior minister and leader of the anti-EU Northern League party, was defiant in the face of pressure from Brussels for the country to keep to previous spending limits, making a deeply personal attack on the president of the European Commission, Jean-Claude Juncker.

“There is someone who is aiming to see Italy on its knees in order to buy its industries,” Mr Salvini said. “They [want to] come to Italy and buy for cheap what out grandfathers have built with their efforts.”

While the anger from the populist leader was raw, the government said it would trim its plans. Economy Minister Giovanni Tria said the budget deficit would grow to 2.4 per cent next year but would gradually reduce in the next two years to meet EU demands.

Tensions between Rome and Brussels revolve around a draft budget scheduled to be handed to the European Commission this month.

Brussels said the Italian plan risks compromising the EU’s economic stability pact and asked the country to rethink its budget draft. Mr Tria effectively renounced its proposal of running a deficit of 2.4 per cent for next three years.

“In 2019 there will be a deviation from targets agreed with the European Commission by the previous government but then there will be a gradual reduction in the deficit in the following years,” he said.

While the euro rose from sixweek lows yesterday, Italian bonds remained under pressure despite Mr Tria’s pledges to cut the deficit faster than expected.

Worries about increased spending had pushed the euro down in the past few weeks as Italian bond yields increased in the past four days.

For Rome and Brussels the spat may not be over.

Mr Salvini has drawn a personal feud with Mr Juncker into the open. They have very different personalities and views of Europe’s future.

“This man is someone who governs 500 Europeans, he comes from a fiscal paradise like Luxembourg – and the fact that the Italian people should be dependent on the whims of a guy who was a minister in Luxembourg seems very odd to me,” Mr Salvini said.

He then brought up claims that Mr Junker has an alcohol problem, saying that “if anyone Googles ‘Juncker sober or staggering’ will find very explicit images, impressive even”.

Brussels remains concerned that Italy’s estimates of how to contain its spending may also be too optimistic. The headline deficit of 2.4 per cent was calculated by the Economy Ministry on the basis of an estimated economic growth of 1.6 per cent for 2019. But Italy grew at a rate of 1 per cent in the first half of this year.

If Italy’s economic growth settles at 1.1 per cent – as estimated by the European Commission – the deficit could reach 3 per cent, in breach of EU rules.

Italian President Sergio Mattarella said at the weekend that the country must adopt a balanced spending plan. While he has the constitutional power to reject the finance bill, it is not clear he would use this authority and risk plunging the country into crisis.

Once the draft budget is submitted in mid-October, the European Commission will have a week to request consultations with Rome if it fears the plan breaks EU rules and two weeks to reject the draft. The commission has yet to reject a draft national budget.

Mr Salvini said he found it odd that Italians should be dependent on the whims of ‘someone who governs 500 Europeans’